Tax competition is indefensible

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I promoted a talk I did in the City last night here, a while ago. My slides are here.

It was an interesting debate, promoted by JustShare, and it saw one of my occasional visits to a church pulpit - something I admit I always enjoy as an active Christian.

My position in this debate was simply stated: I think tax competition unambiguously harmful to the developing world. The evidence is now easy to find: even the IMF agree - as reported here.

And in my opinion it would be very hard to rationally argue that a policy that reduces a state's national income by up to 16% with no obvious benefit arising could be of benefit to any developing country.

Paul Morton, representing the Chartered Institute of Taxation, had a good go at doing so none the less, and at least had the courage to stand up before an audience and state his position, something no one from the Big 4, who were invited to attend, would do.

I thought this fact very indicative of just where the tax debate is right now. I know that those firms are also declining radio and TV interviews on tax havens.

And Paul, who I like, had a hard job of it, because let's be honest, try as you might the underlying philosophy of tax competition is that small states, which I will conveniently call tax havens, use their sole competitive advantage, which is to create legislation, to artificially induce the relocation of profits to their domain where it is lowly taxed, with the long-term goal of undermining the democratic choice of the electorate of larger states who would wish to impose higher rates of tax on corporations and people who are located within them.

The reality is this: tax competition undermines democracy, does not help developing countries, but does without doubt shift the resources of those developing countries to the already wealthy shareholders of companies of the developed world.

It is indefensible.